Google is tackling its competition with Facebook head-on. After revealing the $10.65 billion the company earned in the first quarter of 2012, the company also announced a stock split that will effectively solidify power amongst its founders for better company control.
Google now touts three types of stock, including Class A stock which has one vote each, Class B stock typically reserved for founders which carries 10 votes, and the newly created Class C stock which allows no voting provisions. All newly issued stock will be of the Class C variety. Class B stock cannot be traded and will not be publicly listed. At the announcement of the stock-split, holders of A and B stock were issued a C stock for each holding, effectively splitting the weight of the stock in two.
It’s a strategic move as its biggest rival Facebook sets itself up for an IPO. Facebook stock will carry similar rules that allow CEO Mark Zuckerberg a controlling share of his company. Likewise, Google seeks to retain founder control and ownership of the company to prevent it from bending to temporary winds in the market.
The move also sends an equally important message as its biggest competitor heads to the public markets. With the splitting of the stock, Google is offering further stock as a sure bet to investors on a company that’s been around for eight years and continues to grow in profitability.
Detailing the stock-split with its latest earnings is equally well-timed. Announcing a 24 percent increase in the first quarter over the same period a year prior, the company is showing that it can continually build revenue, even when Facebook is a new social center on the web. Despite the hype and prestige of Facebook and much speculation that Google is losing its relevancy in a mobile and social media age, Google’s stock continues to ramp value.
And while control of the game was the essence of the stock-split, the company maintained that the move was essentially done to ensure Google sticks to its strategic game plan in the midst of market pressures.
“We have always managed Google for the long term, investing heavily in the big bets we hope will make a significant difference in the world,” co-founders Larry Page and Sergey Brin explained in a Founders Letter detailing the move. “Some of these bets have been tremendous, funding our activities and generating significant gains for our shareholders. Others have been less successful. But the ability to take these kinds of risks has been crucial to Google’s overall success and we aim to maintain this pioneering culture going forward.”
Nevertheless, shareholders weren’t buying it, as stocks slipped nearly 4 percent, around $23, a day after the announcement.